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But a tax tribunal ruled there was no real agreement to sacrifice salary and Reed had just manipulated salary figures on payslips after the event.

Reed used several versions of the scheme from 2001 to 2006, the years for which the Revenue is claiming backdated tax.

The arrangement was so complicated that Reed had to set up a helpline for its temporary staff, with some still finding it so confusing that Revenue & Customs was then inundated with calls from temps asking for help.

Reed told Financial Mail last week it wanted to instigate a judicial review over its treatment by the taxman.

The Revenue appeared to give approval to Reed’s set-ups, only n Simon Watkins n Sign Off byline Cable to curb executive pay From Page 71 to change its mind in late 2005.

A senior tax official admitted in an internal email that the department may have ‘cocked up’ in relation to the schemes.

The tribunal judges conceded that Reed would be unable to reclaim the £158million in tax and National Insurance from the temps, who were the ones who should have paid it.

Reed was founded in 1960 by Sir Alec Reed and is still family-owned, with son James chairing the company.

Accounts for one of its subsidiaries involved in the case show that Reed is separately trying to claim back £300 million from the Revenue in overpaid VAT.

A spokesman for Reed said the company was ‘extremely disappointed’ with the decision and that it disputed the figure of £158 million, saying it would appeal.